WheresOurMoney.Org Puts a Human Face on the Refinancing Fiasco That Fed the Financial Crisis
LOS ANGELES, Aug. 10 /PRNewswire-USNewswire/ -- Many of the more than 1 million people facing foreclosure this year weren't speculators or folks "buying too much house." They were homeowners who had affordable mortgages and were refinanced into sub-prime hell during the lending boom. Now they're losing their homes.
In "The Credit Wolves Stalk South-Central," "Where's Our Money" editor Martin Berg digs into the case of one such family, Harold and Patricia King, a retired couple in south-central Los Angeles, who, while they were in their 70s, were sold a series of costly refinancings that left them in financial ruin.
Even though the Kings were living on a fixed income of less than $3,000 a month, lenders decided the Kings were good candidates for option ARM loans with high fees and low teaser payments that soon skyrocketed. They eventually wound up with what's known as a negative amortization loan. They were never told that the minimum payment didn't even cover the interest, and the difference would be added to the principal of their mortgage – and that they would be charged additional interest on their ever-increasing balance.
The vast majority of sub-prime loans between 1998 and 2006 stemmed from refinancing rather than home purchases. Homeowners who repeatedly refinanced faced a much higher likelihood of foreclosure.
"Where's Our Money" is a web-based publication covering the causes of the financial crisis, its impact on American consumers, and proposals for reform. It's written by Berg and consumer advocate Harvey Rosenfield.
SOURCE WheresOurMoney.Org
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